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Emerging Stocks Fall as Petrobras Sinks Energy Producers

Emerging-market stocks dropped for the first time in three days, led by energy companies, as Petroleo Brasileiro SA and China Petroleum & Chemical Corp. (386) tumbled. Indonesia’s rupiah slid to the lowest level since 2009.

The MSCI Emerging Markets Index retreated 0.5 percent to 1,005.40. Petrobras drove Brazil’s Ibovespa to a three-month low, while China Petroleum plunged after the government detained seven people for their role in a deadly pipeline explosion. Egyptian stocks declined the most in a month as political disputes threatened to delay the country’s transition to civilian rule. The rupiah tumbled after Indonesia missed its fundraising target at a domestic dollar debt sale.

A gauge of energy companies in the benchmark for developing-nation stocks posted the biggest slump in five months. West Texas Intermediate declined for a third day in New York on projections that a report tomorrow will show U.S. crude inventories advanced for a 10th week. Prices retreated yesterday after Iran and world powers reached an interim agreement on Nov. 24 to restrict the country’s nuclear program.

“The weakness in energy, whether it’s the result of trading after the Iran deal, fundamentals catching up or lack of demand, tends to put weakness on the entire commodity complex,” Walter “Bucky” Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama, said by phone. “To the extent that reflects activity in the emerging-market area, that’s been a negative.”

U.S. Economy

Investors also watched U.S. economic data for clues on when the Federal Reserve will start paring stimulus. Home prices in 20 U.S. cities rose by the most since February 2006, while consumer confidence unexpectedly slid to a seven-month low.

The iShares MSCI Emerging Markets Index exchange-traded fund rose 0.3 percent to $41.65. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, retreated 2.9 percent to 23.67.

The Ibovespa dropped 1.6 percent as Petrobras sank the most since June 2012 after Folha de S.Paulo reported that President Dilma Rousseff isn’t willing to endorse a plan allowing the oil producer to link domestic fuel prices to international levels. Brazil’s swap rates declined on speculation the central bank will signal tomorrow a slowdown in borrowing cost increases over coming months.

Russia, China

The Micex Index decreased for a second day in Moscow as OAO Inter RAO (IRAO), the worst performing stock in the gauge this year, sank 6.1 percent. Poland’s WIG20 Index dropped the most since September, while the Borsa Istanbul National 100 Index declined 1.3 percent. Benchmark gauges in Hungary and the Czech Republic retreated more than 0.7 percent.

The Shanghai Composite Index (SHCOMP) slipped 0.1 percent, after changing direction at least eight times. Sinopec, Asia’s biggest oil refiner, lost 2.7 percent. Two local officials were also detained by police after the Nov. 22 explosion in Qingdao, the city’s Huangdao district government said in a posting on its official microblog yesterday. The explosion at the pipeline operated by Sinopec killed 55 people.

Goldman Sachs Group Inc. recommended buying Chinese and Russian stocks as a pick up in growth in developed countries and government reforms boost prospects for the “least-expensive” emerging markets. Chinese banks and Russian energy companies could experience “modest valuation expansion,” according to a report today.

Foreign Investors

Indian (SENSEX) stocks fell for the fourth time in five days amid a slowdown in purchases by foreign investors. Cigarette maker ITC Ltd. (ITC), which has the highest weighting in the benchmark index, retreated the most in a week. Tata Consultancy Services Ltd. (TCS) declined 1 percent, sending a gauge of software exporters to a three-week low. ICICI Bank Ltd. (ICICIBC), the country’s second-biggest lender, lost 2.9 percent.

The rupiah fell 0.2 percent to 11,763 per dollar as of 4:16 p.m. in Jakarta, prices from local banks show. It reached 11,798 earlier, the weakest level since March 20, 2009. The government raised $190 million from the bond sale yesterday, short of the $450 million goal, said Robert Pakpahan, director general at the debt management office.

Egypt’s EGX 30 Index slid 1.8 percent, the steepest retreat since Oct. 28. Commercial International Bank Egypt SAE, the biggest publicly traded lender, lost the most in more than three months. The FTSE/JSE Africa All Shares Index dropped to a one-month low in Johannesburg after data showed third-quarter economic growth fell short of economists’ estimates.

The premium investors demand to own emerging-market debt over U.S. Treasuries rose two basis points, or 0.02 percentage point, to 331 basis points, according to JPMorgan Chase & Co.

To contact the reporters on this story: Julia Leite in New York at jleite3@bloomberg.net; Maria Levitov in London at mlevitov@bloomberg.net; Sharon Cho in Seoul at ccho28@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net

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